On Monday, June 8, 2020, Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza issued a joint statement clarifying that partial forgiveness of PPP loans will be available to borrowers who do not meet the “60% threshold,” i.e., those whose payroll-related expenses are less than 60% of their PPP loan expenditures.
The Paycheck Protection Program Flexibility Act was passed by the House of Representatives 417-1 on May 27, 2020, by the Senate unanimously on June 3, 2020, and was signed into law by President Trump on June 5, 2020.
Despite the unanimous Senate vote, several senators had expressed concerns regarding the language, which could be interpreted as imposing a 60% “cliff,” disallowing any PPP loan forgiveness for borrowers who did not meet the 60% threshold.
However, a co-sponsor of the House bill had confirmed that there was no intention of cutting off borrowers from partial loan forgiveness. The new guidance confirms that Congressional intent, subject to the proviso that loan forgiveness amounts will be based upon 60% of the amount forgiven having been spent on payroll-related costs.
The SBA has promised “prompt” new rules and guidance, formulated in consultation with the Treasury Department; we will continue to keep you informed.
It is worth noting that some $120 billion in PPP loan funds have not yet been distributed – it is not too late to apply, if you qualify. The deadline to apply for a PPP loan is June 30, 2020.
If you are at all uncertain about PPP loan forgiveness or the PPP Loan Forgiveness Application, please seek guidance from your advisor. You will want to make sure you get your facts and figures in order before submitting your loan forgiveness application to your lending institution.
We continue to recommend that you track your covered expenses and time periods meticulously, and that you gather and maintain documentation verifying the number of full-time equivalent employees and their pay rates (there are several dates for which this one task must be performed), as well as your payments of eligible payroll costs, eligible mortgage and interest payments, rent, and utilities.
Stay tuned for further developments, which will certainly be forthcoming!
If you have questions on the PPP, please click here to email us directly – we are here to help.
Until next Wednesday –